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In search of contextual variables in a stochastic DEA framework: effect of regulation on efficiency of Indian cement industry

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  • S Bandyopadhyay

    (National Institute of Public Finance and Policy)

Abstract

The paper assesses the difference in the nature of relationship between efficiency and its determinants of Indian cement producing firms in the presence and absence of environmental regulation. It provides an intuitive construct to identify the determinants of efficiency, which is followed by an empirical verification using a two-stage stochastic data envelopment analysis. Important quantitative determinants of efficiency include factor intensities of outputs, levels of pollution abatements, gross value added, whereas size, age, ownership type, development indicators of the place of location of a firm are among the qualitative determinants. An initial phase and a matured phase of regulation are considered in the paper. The main results suggest that capital intensity of output plays a positive role in increasing efficiency under regulation in the initial phase, material intensity in both phases and labour intensity, a negative role, in the subsequent phase. Higher levels of pollution abatements cause higher efficiency under regulation, while in the initial phase private firms report higher efficiencies under regulation; it is just the reverse in the subsequent phase. Size, age and development indicator of the state in which a firm is located can play a positive role to achieve higher efficiencies in the matured phase of regulation.

Suggested Citation

  • S Bandyopadhyay, 2011. "In search of contextual variables in a stochastic DEA framework: effect of regulation on efficiency of Indian cement industry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(9), pages 1621-1637, September.
    • Handle: RePEc:pal:jorsoc:v:62:y:2011:i:9:d:10.1057_jors.2010.193
    DOI: 10.1057/jors.2010.193
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    3. Ghulam, Yaseen, 2021. "Institutions and firms’ technological changes and productivity growth," Technological Forecasting and Social Change, Elsevier, vol. 171(C).

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